Louisiana’s budget crisis: the way many people see it, their future is on the line.
Photograph: Charlie Varley for the Guardian

On 11 February, flashing across TV screens throughout Louisiana, newly elected Louisiana governor John Bel Edwards interrupted that evening’s prime-time viewing with a dramatic announcement.

“Good evening,” he said, sitting behind his wide mahogany desk and flanked by the Stars and Stripes and the Louisiana state flag. “Tonight I speak to you as no other Louisiana governor has ever spoken to our state.”

Nobody can recall a governor going to television to address the state’s budget as Edwards did that night, but then, few can remember things being this bad, either.

Louisiana is a fiscal mess. The state’s budget is in the worst shape it’s been in for a generation, years of neglect leaving a staggering $900m deficit that lawmakers have to close before 30 June to balance this year’s books. Once that’s done, there isn’t going to be any easing up. Next year’s financial situation is set to be even worse, with a staggering $2bn shortfall on the horizon. Two weeks ago, the state’s credit rating was downgraded for the first time in more than a decade.

The scale of the problem is mind-boggling.

“In terms of projected deficit sizes going forward, as well as [how] late in the year we’re in, yeah, this is probably the worst I’ve seen,” Greg Albrecht, chief economist of the Louisiana legislative fiscal office, says.

Progress is being made but it’s been slow, with lawmakers struggling to find a balance between tax hikes and budget cuts in a state that’s spent the past eight years doing everything it can to avoid raising taxes. Meanwhile, as politicians haggle, thousands of hospital patients and university students watch nervously as their futures hang precariously in the balance.

Louisiana’s economy is prone to ups and downs, primarily due to the large role oil plays in the state’s finances. It was an oil crisis that led to the last major budget freefall in 1985, when shop windows in downtown New Orleans were boarded up and one in eight workers suddenly found themselves unemployed. This time it’s slightly different: oil prices have indeed dropped – “kicking us in the teeth”, as Albrecht puts it – but oil only makes up about 15% of the current Louisiana economy.

The state was in trouble long before the cost of oil even began to waver.

“We’ve been running a structural budget deficit for a while,” Albrecht says. “If we’d just projected our pre-[Hurricane] Katrina revenue line, we’d now have a permanently lower revenue line, but we never actually reduced our spending to match it.”

Through various federal aid relief programs plus a boom in oil prices, the state somewhat paradoxically ended up flush with cash following 2005’s devastating twin hurricanes, Katrina and Rita. Knowing the monetary influx was only temporary, then governor Kathleen Blanco urged a cautious approach to the state’s finances, even vetoing several tax cut bills not long before she left office in January 2008.

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“We weren’t stupid or naive,” Blanco says. “We understood it was a recovery economy, and that’s why we put money off in different pots: so the legislature couldn’t spend it all at one time.”

Just before Blanco left, she hosted incoming governor Bobby Jindal and his wife at the governor’s mansion in Baton Rouge. Over dinner, she warned the young, highly touted politician about moves by the legislature to introduce tax cut bills, advising him instead to stash money away in the budget and provide for future ups and downs that were bound to hit the state’s economy.

“He didn’t react,” Blanco says. “I got the feeling that either he was acting as though that was such common and easy knowledge … or maybe that it wasn’t advice he should really take to heart, because he felt like he really knew a lot about governance already.”

When Blanco left office, the state’s finances were between $1b and $1.8b in the black. As soon as he took charge in January 2008, Jindal immediately increased spending by $1b and cut taxes by $600m. When the oil market later tanked, the economy was suddenly in big trouble.

Bowing to anti-tax groups such as Grover Norquist’s Americans for Tax Reform, Jindal and a sympathetic legislature spent year after year cobbling together ad hoc budgets, seizing money from rainy-day funds and cutting money to public services instead of forming any long-term budget plans. (A request for comment from Jindal’s office went unanswered.)

“Maybe for one year that’s not bad policy,” leading Louisiana economist Jim Richardson says, “but for seven years it’s going to run out at some point.” This year it did just that. There was to be no honeymoon period for Governor Edwards.

State politicians are currently trying to negotiate their way out of the situation, holding a special session that’s set to run until 9 March.

It’s a nervous wait for those on the receiving end of potential cuts. Edwards is looking to restructure business taxes to go along with the one-penny sales tax hike and a cigarette and alcohol tax increase the state house passed last week. However, many in the legislature would rather hike sales taxes further or slash even more spending, moves that would disproportionally affect those on lower incomes.

Especially controversial are bills like HB 122, which would cut $100m in funding from healthcare for the mentally ill, the department of education and many other state programs.

“It just goes to show how much corporate interests still rule down there,” journalist and political historian Robert Mann says. “Instead of scaling back some of these corporate tax exemptions by a bit, they choose to go after education even more? It’s just madness.”

The two areas most vulnerable to spending cuts are higher education and healthcare, both of which have already been subject to heavy cuts over the past few years. Last week, hospital administrators threatened to walk away if a proposed $65m cut to the state’s charity hospital program went through.

Yet it’s education that’s been subject to the most heated debate. At the center of the storm is the Taylor Opportunity Program for Students (Tops), a scholarship system on which thousands of Louisianians rely to pay their tuition fees. Allowed to balloon under the Jindal administration, Tops is now costing the state well over $265m per year; last month, the state was unable to pay the last 20% of Tops fees for the summer semester, instead passing the cost along to the universities themselves. Though most students have been safeguarded so far, it’s likely that at some point in the near future many will not be so lucky.

On 24 February, a searingly hot Louisiana day, thousands of banner-waving students from all corners of the state descended on the capitol in Baton Rouge to protest planned cuts to the state’s education system. The way many in the crowd saw it, their academic careers – and futures – were on the line.

Denisha Lee, an 18-year-old psychology student at Southern University, stood outside the capitol with a nervous look on her face. “I’m a strong believer in our schools,” she said. “But if they cut Tops, it’s going to affect me a lot. I’m already working a job, but that won’t bring in enough money to cover me. I might have to skip a semester and work.”

After an hour of vocal protesting, plus an encouraging visit from Edwards, students started to wander back to their cars. Beside the capitol, a lively group of students sat around in the shade of a tree. For some of them, like aspiring videogame designer Blake Ezell, cuts to Tops would have a devastating effect on their careers.

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“I just don’t know how I’d continue going to college,” the 21-year-old said. “If this isn’t resolved, it’s going to be a long time before I’d be able to go back, especially if they raise the cost of tuition. I was going to use my graphic design degree as a skipping stone towards video game design, but now, who knows?”

If the current shortfall isn’t fixed soon, the results could be catastrophic; universities throughout Louisiana could be forced to cancel classes and lay off staff. The clock is ticking. Nevertheless, there appears to be at least a willingness to work towards sensible solutions. Some old hands are seeing encouraging signs.

“I’m very optimistic because I see some bipartisan governing going on,” Blanco says. “I’m seeing people reaching across the aisles. This is typical of Louisiana, but we had had been going in the other direction and getting more partisan. I’m thankful that we have mature, thinking adults who are looking objectively at the situation and are understanding that they have to do some very difficult things. It’s not popular when you’re doing it, but it serves the people and it serves them so well.”